Integral Asset Management chief investment officer Bruce Williamson.
Photo by: Creamer Media
JOHANNESBURG (miningweekly.com) – Mining, preceded by exploration, is the greatest economic multiplier of all business activities, including government expenditure, says Integral Asset Management chief investment officer Bruce Williamson.
It therefore makes huge sense for government to enact attractive investment-friendly policies that encourage exploration and mining.
Explorers and miners are the pioneers that open up a country. Without them, there is a lack of knowledge about the country’s full potential. By simply taking ore out of the ground, mining initiates significant benefits that extend vertically and laterally throughout the economy.
“So, it’s absolutely vital to promote exploration and mining,” adds Williamson, who spoke to Mining Weekly in a Zoom interview. (Also watch attached Creamer Media video.)
Enable mining companies with good coherent policy and the magic multiplier works, he says, pointing out that apart from the infrastructure required to build a mine and the plant, equipment, and the daily consumables that mines require, mining supports heavy and light industry, with the chemical industry in particular feeding into the metallurgical plants of mines. Moreover, mines and the companies they support also need auditors, accountants, lawyers, insurance, tax advice, banks and stock exchange, while the people living in the towns that they create require food, housing, schools, healthcare, retail and everything else that goes with life and living.
“It’s not by luck that South Africa has a world-class financial service system. As the various mining sectors developed and the mining houses developed, they needed financial skills; and then, of course, the mining towns. South Africa is a country of mining and farming towns, with the infrastructure mining helps to develop benefitting the whole of the economy.
“The end game is that mining assists in diversifying the economy, which means that people who are not suited to work in the mining world, end up working in many other fields of endeavour – and let’s not forget about exports that mining generates. If we did not have the dollar flows coming in from the sale of our minerals, we would probably be a very isolated, closed economy.
“The multiplier effect stretches to incredible depths and breadths and I would urge government to put policies in place that don't confuse issues,” says Williamson, while emphasising that government must get going on education and skills development so that the widespread job spinoff created by mines can be well resourced.
Williamson also observes that right now, mining is offering unexpected bonanzas, as it is inclined to do from time to time. This is because the rising prices of particularly platinum group metals (PGMs) and iron-ore are boosting the inflow of dollars into South Africa and strengthening the rand. In addition, increased taxes are also flowing to the South African Revenue Service.
While the financial results of PGM and iron-ore producers to December were good, Williamson predicts that PGM and iron-ore company results for June are going to be “absolutely astounding”, with everyone benefitting as these play out into the economy.
Moreover, there is often considerably more to it than meets the eye. For instance, while the 62% benchmark iron-ore price is at a record $181/t, iron-ore produced in South Africa’s Northern Cape, by companies such as Kumba Iron Ore and Assmang and now also Afrimat, is generally even better priced in that its 64.5% iron-ore content is fetching closer to $200/t-plus.
On top of that, 70% of it is lumpy, which takes the $200/t to $210/t price for the better 64.5% grade a notch higher in that lumpy ore can be fed directly into furnaces, whereas fine ore has to be agglomerated in a sintering plant to produce a pellet: “You can't just put fines into a furnace. So, we get a premium for about 70% of our product,” Williamson points out, while also noting that with better rail infrastructure, South Africa could export much more down the Saldanha line and have the benefit of both added value and volume. “If South Arica could get another 10% to 15% down the line, it would yield massive extra revenue,” Williamson calculates.
“We have to acknowledge that in 1994 the government of the day inherited a demographic time bomb. Uppermost in its mind was employment of marginalised citizens and equality in the workspace,” says Williamson.
His view is that South Africa should now look to soften the policies so that all citizens can benefit from the country’s considerable mineral endowment and mining ability, to set off a large number of jobs across the broadest of economic spectrums.